Knife Capital, a venture capital company based in South Africa, has successfully completed the final closure of Knife Fund III, a $50 million US dollar African Series B expansion fund.
Knife Capital is a venture capital and growth equity investment firm with its headquarters in Cape Town.
The company focuses on innovation-driven businesses that have already demonstrated significant traction. Knife Capital is able to expedite the international expansion of African entrepreneurial enterprises that have found a product-market fit in a beachhead market by capitalising on their knowledge, their networks, and the resources they have access to.
As a lead investor and through co-investment with other reliable funders across the continent, Knife Fund III encourages the growth of African companies that are driven by innovation in order to close a significant financial gap for follow-on operations. The emphasis is placed on high-growth, scalable South African B2B technology companies that have the potential to make an impact and demonstrate substantial returns through exit optionality.
This investment profile will be used to determine which entrepreneurs in other African nations will receive support from the fund. This support will be provided in partnership with seasoned local partners.
A diverse group of investors committed to Knife Fund III, including the team itself, the International Finance Corporation (IFC), the Mineworkers Investment Company (MIC), and the South African Small and Medium Enterprise Fund, in addition to its new Venture Capital Fund of Funds, a pioneering collaboration between government and business that attracted capital from investors such as The Department of Science and Innovation, USAID, The Consolidated Retirement Fund for Local Government, and Rand Mutual Assurance.
Standard Bank, AfricaGrow, Skybound Capital, Fireball Capital, and the Draper-Gain family office, in cooperation with Rand Merchant Bank, are some of the other investors.
Read also: Knife Fund III Hopes to drive innovation in Africa
Knife Capital’s achievement
“We are delighted to bring together such a credible investor base with a reason to care about the growth of venture capital investments in Africa,” said Keet van Zyl, who founded Knife Capital with Eben van Heerden.
“Most of our investors are co-investment partners who share deal flow openly and can augment the investments with alternative funding instruments and follow-on funding for enhanced growth. Raising a venture capital fund in Africa is a long and challenging journey, but we could not have scripted the outcome any better.”
Julien Draper, Knife Capital partner and deal flow custodian said: “Since first close, the fund invested in AI-enabled process optimisation company DataProphet and digital health access platform Kasha, and has a strong pipeline of transactions in various stages of closing out.”
The motivation
Managing partner Andrea Bohmert mentioned in an interview that took place in February 2021 that Africa had become an incubator for international investors. These investors write growth-stage checks, but due to this gap, they are unable to provide the essential local support. Andrea Bohmert said that Africa had become an incubator for foreign investors. at addition, there are not enough local venture capitalists at the growth stage, which has prevented many international investors who were looking for co-leads from moving through with an investment.
Knife Capital III, as it has been dubbed, will concentrate on South African entrepreneurs who are in the Series B stage of their businesses in an effort to bridge this funding gap. According to the venture capital business that has been around for twelve years, these startups have promised and demonstrated excellent returns through exit optionality. Additionally, it will join forces with local investors to co-invest in enterprises based in other African nations.
Since its founding in 2010, the venerable South African company has made progress in a manner that can be described as both methodical and consistent. Knife Capital Fund I, also known as HBD Venture Capital, was a closed private equity fund with a capitalization of ten million dollars that was managed by Eben van Heerden and Keet van Zyl.
The company provided start-up businesses with seed money. In 2016, the venture capital firm introduced its 12J offering in conjunction with the Knife Capital Fund II. The KNF Ventures fund, which has a total capitalization of $25 million, is still active and focuses its investments on the Series A stage of business development.
Knife Capital has already had seven successful exits across its first two funds, including important ones such as Visa’s $110 million acquisition of fintech firm Fundamo and orderTalk’s acquisition by UberEats. In order to assist the company’s worldwide expansion, Knife Capital will be hoping to replicate these successes with its third fund.
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The investors
A diverse group of investors have committed to Knife Fund III. These investors include the team itself, the International Finance Corporation (IFC), the Mineworkers Investment Company (MIC), the SA SME Fund as well as its new Venture Capital Fund of Funds, Standard Bank, AfricaGrow (a German Fund of Funds supported by DEG, KfW, and AllianzGI), Skybound Capital, Fireball Capital, and the Draper-Gain family office in collaboration with Rand Merchant Bank.
Previous beneficiaries
With an average cheque size of $3 million (the remaining capital will be retained for follow-on investments), the venture capital business located in Cape Town intends to invest in 10-12 companies through this fund. It has made investments so far in DataProphet, which is a South African artificial intelligence as a service company, and Kasha, which is a Rwandan health access platform.
Knife Capital is set to help more businesses with the newly generated fund.
